The proposed amendment to the Companies Act 1994 for the purpose of appointing administrators with indemnity power to troubled companies will have dangerous consequences, experts said yesterday.
“Even though the firms were established by private sector entrepreneurs, the amendment will empower the government to take over the companies,” said M Zahir, a senior jurist of the Supreme Court.
The proposed change might encourage the government to appoint administrators at the hint of slightest of complaints, he added.
“The power to appoint an administrator on the subjective satisfaction of the government and without going to court … may be misused,” Zahir said.
Barrister Tanjib-ul Alam, an advocate of the Supreme Court, echoed Zahir's views regarding possible abuse of the power.
The government should not have “such unconstitutional, harmful, absolute power”,' he said.
“In the consultation meeting [with the commerce ministry on Tuesday], I opposed even the safety clause option in the proposed amendment of the act,” he said.
The government should instead finalise the proposed multi-level marketing law with an option to appointment administrators to the rogue companies, he said.
Parveen Mahmud, a former president of the Institute of Chartered Accountants of Bangladesh, termed the proposed amendment a “black law” and that people would be discouraged to undertake investment if it goes through.
“The current move will definitely bring an uncertainty to investment climate,” she said, while adding that the government cannot penalise all the companies of the country for just one company -- the Destiny Group.
“The thriving private sector will be the worst sufferers if the amendment is finalised,” she said.
The existing law allows the government to appoint administrators through court verdict, so the amendment is unnecessary, Mahmud said.
Rather, the government should concentrate on upgrading the current companies law to global standards, she said.
The commerce ministry initiated the amendment of the Companies Act 1994 following incarceration of the hierarchy of Destiny Group for alleged involvement in fraudulent activities.
The modification would give indemnity power to administrators.
The move, however, is being vehemently protested by business leaders and legal experts alike due to the specification of indemnity power.
The proposal was sent back for further review from the regular cabinet meeting on October 22 as the cabinet deemed the move to be potentially detrimental for companies.
As per suggestions of the cabinet, the commerce ministry held a consultation meeting on October 30 with business leaders and legal experts who voiced their opposition to the amendment.
The commerce ministry will send the proposal to the next cabinet meeting scheduled for next week.